Mattel’s Unceasing Abuse of Chinese Workers: An investigation of six Mattel supplier factories

Executive Summary

In the span of one year, six Chinese factories making toys for Mattel steal between $8 million and $11 million from their workers. Mattel has approximately 100 suppliers in China, and these millions may only be the tip of the iceberg, because it is only through labor abuse that factories are able to accept such low prices from Mattel to produce its toys.

Mattel knows about such legal violations, but it does not take the steps necessary to prevent wage theft and other abuse. Instead, Mattel encourages abuse through its purchasing practices and inaction when labor violations are uncovered.

Mattel’s complicity in labor violations

In order to reduce investment risk and maximize profits, retailers like Mattel usually outsource production to factories in developing countries like China. In 1997, Mattel put in place a code of conduct which it purportedly demands factories in its supply chain to adhere to. This code includes basic fairness to factory workers and adherence to local laws. Since that time, despite continually promoting its code of conduct to customers and the public, Mattel has simultaneously demanded rock-bottom prices and short deadlines from factories producing Mattel toys.

Given the intense competition between manufacturers for orders, factories have little leverage at the bargaining table, and most accept the low prices and tight time schedules. But the costs of property and materials in China continue to rise at a rapid pace, and manufacturers are adamant about the quality of raw materials and the end products, so Mattel’s factories achieve cost reductions through the degradation of labor conditions, in turn violating Mattel’s code of conduct and local laws. Workers at the bottom of the system are forced to bear the brunt of this burden.

Furthermore, Mattel clearly understands the breadth and persistence of labor violations in its Chinese factories. As detailed in a 2012 report published by China Labor Watch (CLW), for over a decade, audits commissioned by Mattel itself have uncovered labor violations in factories producing Mattel toys. But Mattel has taken little meaningful corrective action, and over time, Mattel’s public reporting of these audits has become more and more limited.

CLW’s 2012 investigative report (linked above) pulled back the curtain on labor violations in just four of Mattel’s toy factories. But instead of responding with comprehensive action plans and increased transparency, Mattel denied most of CLW’s findings, claiming in a letter to CLW that [Mattel has] determined that with few exceptions the allegations are unfounded. On May 3, 2013, CLW and its partners sent a follow-up letter to Mattel demanding clarification, but as of October 14, 2013, the company has still not responded.

CLW’s 2013 investigation: labor violations deepen

Based on the findings in CLW’s newest investigative report, little has improved since last year’s investigations. From April to September 2013, CLW investigators entered six factories in China producing toys for Mattel, acting as workers in the factories for a period of days or weeks, working and living as any other production worker in the factories. These six factories included the Baode Toy Factory, Dongyao Toy Company, Nanhai Sino-American Toy Factory, Guangda Plastics Company, Taiqiang Plastic Products Company, and Merton Plastics and Electronics Factory. The factories together employ more than 20,000 workers.

Through CLW investigators’ personal experience and over 300 worker interviews, CLW uncovered a long list of ethical and legal violations in each factory.

One of the most alarming findings was the various methods—many illegal—that Mattel’s factories use to reduce their workers’ due wages and benefits. Through a combination of unpaid overtime hours, work hour trickery, and voluntary social insurance (social insurance is legally mandated in China), Mattel’s supplier factories are stealing millions of dollars from workers. CLW’s conservative estimates put the total annual amount at between $8 million and $11 million, and this is only the wage theft in six of Mattel’s approximately 100 Chinese toy factories.

For example, at the Taiqiang factory, 6.65 hours of each worker’s work on the weekend is paid at the normal rate instead of weekend overtime rates. These hours are ostensibly “shifted” from the work week to the weekend. With about 5,000 workers, Taiqiang can save 600,000 RMB ($98,163) in labor costs each month with such wage trickery.

Despite Mattel knowing about severe, ongoing labor rights violations in these supplier factories, it continues to provide toy orders to these plants year after year.

In August, a group of 322 workers at the Baode Toy Factory went on strike to demand compensation for unpaid social insurance. Mattel has carried out an investigation but has not yet publically responded. It must not choose to stop working with Baode as a solution, as this would effectively put its workers into unemployment. Letters, photos, and other material from the request for collective negotiation and subsequent strike can be found beginning on page 24 of this report.

In total, CLW’s undercover investigations revealed 18 sets of legal and ethical violations. These issues are summarized below, and a specific list of each factory’s violations can be found in the beginning of each individual report section of this document.

1. Hiring discrimination. Some Mattel supplier factories refuse to hire people over a certain age, pregnant women, those with tattoos, or men with long hair, in conflict with China’s Provisions on Employment Services and Employment Management.

3. Labor contract violations. Some Mattel supplier factories have workers sign incomplete labor contracts, while others do not sign contracts with workers at all or do not complete the signing before the workers go on the job. These actions are all in violation of Article 7 and Article 8 of China’s Labor Contract Law.

4. Ineffective and perfunctory pre-work training. Mattel supplier factories fail to provide pre-job training to workers that meets the minimum standard of “24 class hours”, as stipulated in China’s Provisions on Safety Training of Production and Operation Entities. The longest training period among the factories investigated was only one and a half hours. The result of insufficient training is that many workers do not fully understand the risks of their work to their health or how take necessary steps to protect themselves.

5. Excessive overtime hours. Mattel’s supplier factories have workers doing 84 to 110 hours of overtime per month, two to three times in excess of the statutory limit of 36 hours stipulated in Article 41 of China’s Labor Law.

6. Long standing shifts. In Mattel factories, some workers stand for 10 to 13 hours of work per day, also violating Article 41 of China’s Labor Law, which stipulates that employers should not have workers labor more than nine hours per day.

7. Harsh night-shift schedules. At one factory, the company makes workers switch between night and day shifts as often as once per week.

8. Wage payment delays. Some factories do not pay workers in a timely manner, sometimes compensating them almost a month after the pay period has ended.

9. Wage theft. As mentioned above, Mattel supplier factories use various methods to reduce payments to workers and workers’ social insurance. CLW’s conservative calculations put the total for unpaid overtime and shifted overtime hours at between $2.1 million and $5.3 million per year, while the total for unpaid social insurance is $5.9 million. The factories often do not provide some types of social insurance, especially retirement insurance, to workers, instead making it “voluntary”. But according to Chinese law, the purchasing of social insurance is mandatory. By not paying workers’ retirement insurance, factories save in costs equal to 13 percent of the base wage of each worker each month.

10. Dorms are hot and crowded. Factories manufacturing Mattel toys provide poor living conditions for their workers. Usually between 8 and 12 people live in a single room, sharing a handful of restrooms and showers with hundreds of other workers on their floor. Air temperature is not controlled well and many workers don’t have hot water for showering.

11. Inconsiderate housing of workers. Some factories do not take care to organize workers according to shifts, leading to day- and night-shift workers living in the same room, disturbing one another’s rest on a regular basis.

12. Worker health concerns. Workers making Mattel toys are not always given protective equipment or do not properly use it, despite coming into regular contact with harmful chemicals or dangerous work environments. This is in part a product of insufficient pre-job safety training (described above).

13. Discrimination against pregnant women. One factory will not allow a woman to take maternity leave unless she proves that she is abiding by China’s family planning policies. This may put a woman having a second child in a position in which she must choose between aborting her baby and losing her job.

14. Worker fines. One factory carries out indirect fining of workers. A worker who checks his cell phone will have that day’s working hours reset to zero, effectively not paying the worker for the actual work that he did.

15. Fire hazards. Some factories have fire safety concerns, such as blocked escape routes, locked emergency exits, or extinguishers and fire hydrants that have not been properly inspected.

16. Lack of effective grievance channels. Mattel supplier factories lack the mechanisms needed to give workers an effective means by which to voice grievances or concerns. For example, there is a union at Dongyao factory, but despite each worker being charged a 3 RMB ($0.49) union fee every month, there was no sign of union activity, and workers do not even know what the union does.

17. Lack of a living wage. The workers making Mattel toys are not paid enough to make a living. The minimum wage that they are paid is not enough to save much or raise a family, so workers become dependent on tremendous amounts of overtime to make an income that still falls short of the local average wages.

18. Environmental pollution. One factory disposes of toxic waste and waste water improperly and uses prohibited caustic chemicals, the use of which it hides from official during inspections.

Based on CLW’s investigations, it is clear that Mattel has once again failed to ensure that the factories making Mattel toys live up to the commitments in Mattel code of conduct. CLW hopes that instead of responding in denial, as it did in response to the 2012 report, Mattel will approach this matter positively, focused on taking action and preventing the occurrence of future violations. CLW raises the following actions points for Mattel:

Respond to this report. Mattel should provide detailed information on follow-up audits to CLW’s investigations as well as the immediate and long-term measures that Mattel will take to correct and prevent labor violations.

Do not abandon the workers at Baode. Mattel should respond constructively to the worker protests (discussed above and detailed on page 24), and it must not choose to stop using the factory for production, all but guaranteeing that the workers lose their jobs. Mattel should take responsibility for the fact that violations at Baode are in part a product of Mattel’s purchasing practices.

Transparent reporting. Going forward, all complete audit reports and corresponding corrective action plans should be published in a timely manner on Mattel’s website.

Reform buying and just-in-time practices. Mattel pays supplier factories too little and demands that these factories deliver products in very short periods of time. The result is that the factories making Mattel toys often try to reduce costs through labor abuse, such as illegally long hours, unpaid wages and benefits, or poor living conditions. Mattel should reform these practices to contribute to reducing pressure on workers.

Production transparency. Mattel should publish a list of all supplier factories as well as put the names of these factories on its products. This will increase the transparency in Mattel’s supply chain.

Establish third-party hotlines. Independent third party actors, such as an NGO, can provide workers with a direct channel by which they can express grievances and potential solutions with factory management. Mattel argues that the hotline run by ICTI (International Council of Toy Industries) serves this role. But the inability of this industry group to respond effectively to violations uncovered by the hotline is reflected in the lack of improvement in Mattel’s supply chain.

Worker committees. Each factory should have an independent worker committee whose leadership is selected directly by the workers they represent. The candidates for committee leadership should also be nominated solely by workers, not by factory management. This committee would represent workers in discussions with management about any aspect of working or living conditions that workers deem important.

The toy industry in China: 15 years of suppressing labor rights

In 1998, only one year after Mattel established a code of conduct for its suppliers, CLW’s founder Li Qiang began investigating the Merton Plastics and Electronics Factory as part of an investigative report that was published by CLW in 2000. The report revealed that Merton workers did 12.5 hours of work per day, received no days off except for national holidays, were given no retirement insurance by the company, had to pay for expenses in the factory’s medical clinic, and did not know whether there was a union or what it did.

Ten years later, in 2009, CLW carried out a second investigation of the Merton factory. Among the violations listed above, only work hours showed improvement, albeit minor. Rather than 12.5 hours of work per day, workers did 11.5 hours, and were sometimes allowed Sundays off.

This year’s investigations once again included Merton, 15 years after the initiation of CLW’s first investigative report on Merton. And in these 15 years, not one of the major violations above was resolved. In fact, the working hours have even partially reverted back to the poorer state of hours in 1998. CLW’s 2013 investigation shows that while workers are still doing 11.5 hours of work per day, they may not get a single day off of work, outside of national holidays.

Mattel has been using Merton as a supplier since CLW’s first report in 2000. Despite a code of conduct that predates this publication by three years, Mattel has failed to make Merton adhere to its code of conduct for over 15 years.

Merton is a symbol for the state of the toy industry’s labor conditions in China. Over the past decade, conditions in toy factories have either persisted without change or deteriorated. In the struggle for the realization of workers’ legal and human rights, the toy industry, including both factories and brand companies, is a hindrance to progress.

Even in relation to other problem industries, the toy industry stands out as being particularly recalcitrant in improving labor conditions. Take, for example, the electronics industry. Foxconn is a major electronics manufacturing supplier, producing for companies like Apple, HP, and Dell. Notwithstanding its own violations, Foxconn’s factory in Shenzhen will pay a worker who does 70 hours of overtime in a month about 3,700 RMB ($604) for that month, also providing all types of social insurance as required by law.

Mattel’s supplier the Taiqiang Plastic Products Company, investigated as part of CLW’s newest report, is also located in Shenzhen. Taiqiang will pay a worker who does 130 hours of overtime in a month only about 3,200 RMB ($522) for that month, and the worker will not receive retirement insurance. Said another way, a toy worker working almost twice as many overtime hours as an electronics worker will receive 15 percent lower wages.

Working hours, wages, and social insurance are just a few aspects of the extent to which labor violations persist in the toy industry. Toy workers also live in shoddier, more crowded dorm rooms, work in poorer working conditions, and are more often cheated out of overtime wages.

The sad state of labor conditions in the toy industry is a reflection of the failure of brand companies like Mattel and industry groups like ICTI to uphold their code of conducts. Unless a serious effort is made to stop the reoccurring abuse, 15 years may become just the beginning of a tragic legacy.